What's Up with Salesforce?


By: Mary Jander

Salesforce (NYSE: CRM) has become the unwilling poster child for the worst fears of big public cloud tech firms during the present financial “pause.” As if the defection of top executives, reduced sales, and the layoff of thousands of workers weren’t enough, activist investors have surfaced, sharklike, threatening aggressive changes (specifics momentarily).

All of which raises questions: What’s going to happen to Salesforce, and how does that reflect the future of other big cloud companies?

Let’s start by reviewing a timeline of recent Salesforce woes:


August 24: Salesforce reports 26% growth in revenue year-over-year, but trims guidance by $800 million.

October 18: Activist investor Starboard Value takes an unspecified but “significant” stake in Salesforce.

November 7: Salesforce lays off about 1,000 workers, citing reduced demand in some regions of the globe.

November 30: Salesforce Q3 report disappoints investors; the company raises guidance a bit but the stock falls. Also: Co-CEO Bret Taylor resigns.

December 1: Tableau CEO Mark Nelson resigns.

December 5: Slack co-founder and former CEO Stewart Butterfield resigns.

December 16: Co-CEO Marc Benioff issues an internal Slack post decrying employee productivity, saying: “New employees (hired during the pandemic in 2021 & 2022) are especially facing much lower productivity….”


January 4: Co-CEO Benioff announces that layoffs will affect about 10% of Salesforce’s workforce, or roughly 8,000 jobs. The company will also reduce its real estate holdings.

January 22: Elliott Investment Management takes a “multibillion-dollar” stake in Salesforce, heralding a potentially aggressive push for changes at the company that could include more layoffs.

Profits an Issue

Questions about Salesforce tend to focus not so much on its sales but on its profitability. Marc Benioff has been criticized for failing to curb spending on M&A while profit margins remain low. In 2019, Salesforce spent nearly $16 billion to acquire data analytics firm Tableau; in 2021, the company closed its nearly $28 billion purchase of messaging firm Slack. Investors criticized both buys as expensive purchases that sacrificed sagging profits for growth.

A Market Slowdown

Aggravating Salesforce’s issues is a market in which budgets have been trimmed: “[T]he environment remains challenging and our customers are taking a more measured approach to their purchasing decisions,” wrote Benioff a January 4 memo to employees. Other companies have validated the slowdown in tech decision-making and the reduction in overall spending worldwide.

All of which prompts questions about what may happen to Salesforce near term. Following are a few potential outcomes:

More layoffs and office closures. It’s widely believed that Salesforce will be pressured by activist investors Elliott Investment Management, which is famous for putting pressure on targeted companies, and Starboard Value to lay off even more workers and to divest even more of its real estate holdings, including hundreds of thousands of square feet of property worldwide as well as a 75-acre Trailblazer ranch south of San Francisco that is used for training and socializing.

Reduction in remote work. Marc Benioff’s December memo to staff openly questioned the value of remote work, and later, in announcing layoffs, he acknowledged that many workers hired during the pandemic, many who work remotely, were no longer needed: “As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing, and I take responsibility for that,” he stated.

Invasion by more activist investors. The combination of a lowered share price with the established market presence of Salesforce will undoubtedly attract more aggressive investors, who, projecting untapped value in Salesforce, will push for change.

Divestiture of key acquisitions. Salesforce could be forced to spin off acquisitions such as Tableau or Slack to reduce operational costs and improve margins. The departure of executives Nelson and Stewart indicate that this has become a recognized possibility.

Installment of new co-CEO. Marc Benioff has been integral to the culture of Salesforce, and replacing him would be difficult and problematic. Still, the co-CEO structure he’s implemented is likely to fuel board and investor demands.

The Broader Picture

What happens at Salesforce is a warning to other publicly held enterprise software vendors, many of which face similar difficulties. Only by maintaining shareholder value – even at the cost of trimming staff and projects -- will companies fend off the aggressive shareholders and forced changes they bring.